Climate is right to buy a franchise

In the same way a buoyant economy has caused many employers to complain of a skills shortage, some franchisors have been finding it difficult to find franchisees.

This is particularly so for lower-cost franchises, the kind people buy into when they can't readily find other employment.

Home services operator VIP is having to turn work away because it is short of about 10 franchisees in the Auckland region, says the company's national franchisor, Estelle Logan. "We can't get enough franchisees. We have work to satisfy more but we don't have the quantity of franchise inquiries to supply that demand.''

There have been patches of increased interest in franchising, but for most of the past 12-18 months, the level of inquiries has been much lower than previously, Logan says.

The economy's appetite for workers means older people, who can struggle to find employment in a downturn, have less incentive to seek alternative incomes. And employers confronted with workers with itchy feet are willing to offer  better pay and conditions to  keep them.

"Employers know how hard it is to get a replacement. So that does have an impact on people who would look to buying a small business of their own and buying a franchise,'' Logan says.

However, not everyone is feeling the tight labour market's effects so sharply. Adrian Kenny, who runs @ Your Request, another home services provider, says while there are fewer prospective franchisees in the market, his outfit isn't going short.

Kenny, whose franchising experience began in 1991 with his own redundancy, to which he responded by starting Green Acres, says the present conditions call for innovative ways of attracting franchisees. "I've spent a lot of money on the technology side so that when someone looks at our franchise, they're getting a lot more back-end to their business.''

@ Your Request is web-based, allowing franchisees to use the internet to retrieve job orders and communicate with customers, and letting Kenny keep an eye on the business. "I've cut out a lot of wasted time so these guys [franchisees] are able to spend a lot more time in the field, and that's where they make their money.''

Even so, Kenny says some parts of the franchise have to work hard to attract franchisees.  Its newest offering, a handyman service, dispensed with up-front fees for franchisees, typically $20,000- $30,000, so it could match the earning opportunities available to tradespeople in the booming construction sector.

Franchises were instead paid for by a weekly fee. Kenny said that approach has worked, and is being offered as an option for the franchise's other services. "When employment is at levels like this, you have to provide options that aren't a big burden on franchisees,'' he says.

The chief executive of Napier-based Fastway Couriers, Michael O'Driscoll, says any franchise depends on a constant supply of new people, so recruiting is at the core of the business. He  says conditions are challenging. "The way you recruit and the messages you send need to fit the economic conditions of the day. When there are low levels of inquiry, you need to work harder and smarter at it.''

Fastway looks for franchisees at two levels, van drivers and depot operators.

The first group might pay between $5000 and $50,000 for a territory, and a depot operator from $50,000 up to $1 million.

In 23 years of trading, the business has found tried and true recruiting methods, O'Driscoll says.
At the courier level, one effective strategy has been to target the taxi industry through advertising in its publications and on company noticeboards. Taxi drivers are encouraged to compare the often unsociable hours they work, and uncertain income, with the predictability of a five-day week and steady earnings.

The fitness benefits of the courier's job are also emphasised, and sports clubs are another source of recruits. "We go to sporting associations and get on the noticeboards there; we go to the places where the types of people who would make good couriers for Fastway might be congregating.

"If we do have to advertise, we tend not to run traditional business-for-sale classified ads. We might stick them in the sports pages, or in TV guides.''

The results speak for themselves. O'Driscoll says an information night held in Auckland last month attracted 40 people. "A lot of people say recruitment costs money, and it does, but if you're not doing it, you're not investing in your franchise network.''

As gathering clouds signal a lessening of the past few years' economic boom, the silver lining might be easier times ahead for franchisee recruitment.

Simon Lord, publisher of Franchise New Zealand magazine and immediate past-chairman of the Franchise Association, says property has been a popular investment during the economic good times, at the expense of franchises.

"That market is flattening out now and so what we will see is people using the increased equity they have in their property to fund moving into businesses of their own again.''

VIP's Logan takes heart from that, and other signs the economy is coming off the boil.
"When the media talks about the economy not doing so well, it does have an effect on what people think. They start thinking that `maybe my job isn't so secure'. So we see spurts of interest.

"I think the economy is slowing and that's good for us.''